Article 19(6) of the Deposit Guarantee Schemes Directive (DGSD) requires the European Commission to submit to the European Parliament and to the Council a report on the progress towards the implementation of the DGSD. To support the Commission in meeting this obligation, the European Banking Authority (EBA) committed to drafting three opinions on the DGSD.

On 8 August 2019, the EBA published its first opinion on the deposit guarantee schemes’ eligibility, coverage and cooperation. The EBA will deliver two more opinions later this year covering deposit guarantee scheme payouts and deposit guarantee scheme funding and the uses of such funding.

Key points in the EBA’s first opinion include:

  • in relation to the temporary high balances in cross-border payouts, no changes to the DGSD, at this stage, seem necessary. There also seems to be no need to provide any further guidance or advice using other instruments;
  • in relation to third country branches, the current provisions on the transfer of contributions for third country branches are sufficiently clear and there is no need to propose changes to the DGSD in relation to this matter and/or to provide any further related guidance or advice;
  • the current coverage level of EUR 100,000 is adequate and therefore no changes to this amount seem necessary;
  • in relation to the coverage of deposits at EU credit institutions’ branches in third countries, an amendment of the DGSD is appropriate. The amendment should ensure that deposits in these branches are not protected by an EU DGS of which the EU credit institution is a member;
  • on current provisions on eligibility the DGSD should be amended to remove from the definition of a deposit the word ‘normal’ in relation to banking transactions;
  • the topic of absolute entitlement to the sums held in an account is complex, so further analysis may be needed of how best to formulate the wording in different pieces of EU legislation;
  • the Commission should enhance clarity in the DGSD on how the see-through approach applies to deposits placed with credit institutions by account holders who are excluded from eligibility;
  • certain amendments to the information sheet in Annex I to the DGSD should be amended including the abolition of the requirement for acknowledgment of receipt by the depositor;
  • the DGSD, and in particular Article 15, should be amended and replaced by provisions stipulating that branches established within the territory of Member States by a credit institution that has its head office outside the Union, if they are licensed by the relevant supervisory authority in the EU to take deposits as defined by the DGSD, must join a DGS in operation within the territory of the relevant Member States; and
  • by way of derogation from the above, some flexibility could be provided to Member States to exempt branches established within their territory by a credit institution that has its head office outside the Union from the obligation to join a DGS in operation within their territories. Such a decision could potentially be made on the basis of a voluntary equivalence assessment, and where it is absolutely necessary in order to maintain the level playing field, depositors’ confidence and financial stability. If protection is not equivalent, Member States must stipulate that such branches must join a DGS in operation within their territories.